Thursday, December 18, 2014

you can't a accuse competitor of lawbreaking when courts have ruled against you

Following a series of unsuccessful lawsuits with Paul Davis
Restoration, Inc., Matthew Everett, a former franchisee, began running a radio
ad:

This is a business advisory. Paul Davis
Restoration, Inc., a national operator of fire and water restoration
franchises, is seeking a judgment of 25 percent commission on certain prior
sales, which constitutes an unenforceable penalty in violation of Wisconsin
state statutes and case law governing such restrictions and practices. In
addition, they are seeking to impose several other terminations and conditions
that are in direct violation of Wisconsin’s Fair Dealership laws, those
Wisconsin laws which are designed to protect all Wisconsinites. To learn more,
please visit pdr-wi.com. This ad paid for by Paul Davis Restoration of NOWI.

The court enjoined Everett from using “Paul Davis
Restoration” as a trade name; he was no longer a franchisee.Although he agreed to remove that reference
from the ad, given the litigation history between the parties, the court found
that he hadn’t mooted the claim.

Paul Davis also argued that the rest of the ad was false and
misleading; Everett argued that suppressing it would violate the First
Amendment. Jordan v. Jewel Food Stores, Inc., 743 F.3d 509 (7th Cir. 2014),
used a test for identifying commercial speech assessing whether (1) the speech
is an advertisement; (2) the speech refers to a specific product; and (3) the
speaker has an economic motivation for the speech.

The speech was undoubtedly in the form of an ad, and
presumptively had an economic purpose: “advertising costs money, and most
private citizens do not buy ad time merely to express their personal or
political views.”Also, Everett was a
competitor of Paul Davis, and the content addressed topics of economic
import.And Everett’s own emails showed
a purpose to divert business from Paul Davis to Everett: “This began running
today in the markets we serve. It will begin running Statewide next week. …” Running the ad in “the markets we serve” limited
the ad to areas where Everett had an economic interest in driving business away
from Paul Davis. “The threat implied by the ad is that Paul Davis’ business
from the state and insurance carriers will dry up (and migrate to Everett’s
business).” Also, the ad labeled itself a “business advisory,” which the court
found to be “an effort to make the communication sound official, rather than
something based on a citizen’s private views.”

The ad didn’t refer to a specific product, but it did refer
to a specific company and that company’s services. In context, it was clearly
commercial speech.

In addition, the court found that the ad was false.The ad claimed that Paul Davis was seeking “an
unenforceable penalty in violation of Wisconsin state statutes and case law governing
such restrictions and practices.” That is, the ad said that Paul Davis was
breaking the law.But it was merely
seeking to enforce an arbitration award against Everett.Even if the arbitrator got it wrong, “the
fact that questions of law may be arguable does not mean a competitor can
accuse a company of illegal conduct merely for seeking to enforce a lawfully
obtained arbitration award. If Paul Davis’ CEO were tried and exonerated for a
crime, a competitor would not be able to claim that the CEO committed criminal
acts merely on the basis that it was the competitor’s opinion that the jury
erred.”(I should note that this rule must
be limited to commercial speech.If I,
acting as a private citizen, opine that OJ Simpson is a murderer, the jury’s
verdict of acquittal can’t be dispositive, and couldn’t be even before the
civil verdict agreeing with me.)There
was no reasonable argument that Paul Davis was breaking any law by seeking to
enforce an arbitration award, making the claim misleading and false.

The next statement, accusing Paul Davis of “direct violation of Wisconsin’s
Fair Dealership laws,” also simply took issue with the rulings of the
arbitration panel and the courts.The
claim of “direct violation” was not just an opinion but implied that the Paul
Davis’s liability was clear, “when just the opposite is true.”Accepting that many legal questions are
arguable, and thus unfalsifiable, “would allow anyone’s subjective legal views
to insulate them from liability simply on the basis that they disagreed (for
whatever reason) with the rulings of a court.” Everett was free to run an ad
expressing disagreement with the arbitration or the courts and arguing why he
believed they erred.“But here, the ad
makes the preposterous claim that there is something illegal about attempting
to enforce an arbitration award. The only conceivable purpose of such an
assertion is to mislead consumers and others into thinking that the Plaintiff
has engaged in illegal activity.”

Thus there was a strong likelihood of success on the merits.
The parties didn’t much discuss the other factors, but “[g]iven the difficulty
of calculating damages due to false accusations of illegal activity, the
Plaintiff would suffer irreparable harm and would have no adequate remedy at
law.”So an injunction against the ad
issued.

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